May 24, 2018 06:18 PM

Merkel Walks Diplomatic Tightrope in Beijing

German Chancellor Angela Merkel attends a joint news conference with China's Premier Li Keqiang  at the Great Hall of the People in Beijing on May 24. Photo: VCG
German Chancellor Angela Merkel attends a joint news conference with China's Premier Li Keqiang at the Great Hall of the People in Beijing on May 24. Photo: VCG

(Reuters) — China welcomes German firms and will protect their investments, Premier Li Keqiang said on Thursday after meeting visiting German Chancellor Angela Merkel, who said Germany supports Chinese investment there.

Merkel faces a delicate diplomatic balancing act on her two-day China visit, which is clouded by U.S. President Donald Trump’s trade threats and his decision to pull out of the Iran nuclear deal.

Germany and China, two exporting nations that run large trade surpluses with the United States, have found themselves in Trump’s firing line and are scrambling to preserve the rules-based multilateral order on which their prosperity rests.

But while Merkel’s hosts may be keen to send a message of total Chinese-German solidarity in Washington's direction, German officials have suggested that Merkel must avoid the appearance of siding too openly with China in a confrontation with Germany’s longtime ally.

Li, in a joint media appearance with Merkel at Beijing’s Great Hall of the People, said China and Germany both uphold global free trade, and stressed the huge potential for cooperation between them.

Though the two countries had problems, they could be overcome, and increasing cooperation was good for Europe and the world, Li said.

“China’s door is open. You can say it will open even wider,” he said, standing next to Merkel.

China welcomes German producers of autonomous vehicles to invest in China, Li said, pointing out the country had already lowered entry requirements for new-energy vehicles.

The two countries needed to strengthen two-way investment in an open and inclusive way, he said.

“If they come across any problems during their investment, especially when it comes to legal protections, I can clearly tell you that China is striding forward to being a country with rule of law,” Li said.

China will protect their interests in accordance with Chinese law and China will adjust its rules as needed, he added, without elaborating.

Merkel welcomed China’s recent announcements that it will further open its financial sector to foreign participation and reduce Chinese joint venture requirement in sectors such as automobiles, a mainstay of German investment in the world’s second-largest economy.

In reality, Merkel’s government shares many of the Trump administration’s concerns about Chinese business practices, including what many Western countries have complained are state-backed efforts to pressure foreign companies into giving up trade secrets.

But Trump’s “America First“ trade policy, his administration’s professed disdain for the World Trade Organization, as well as his withdrawal from the Iran nuclear deal, have pushed China and Germany into closer alignment, German officials say.

Merkel went to Washington last month to lobby Trump to stay in the Iran nuclear pact, only to see him withdraw days later and threaten sanctions against European firms that continue to respect it.

The trip is Merkel’s 11th to China since becoming chancellor in 2005. Accompanied by an industry delegation of roughly 20 German executives, she later in the day attends a dinner hosted by President Xi Jinping.

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